Crisis deepens as Moody’s downgrades French banks

Moody’s cut the credit ratings of two French banks on Wednesday because of their exposure to Greece's debt, highlighting growing risks to Europe's financial sector from the deepening euro zone sovereign debt crisis.

Moody’s cut the credit ratings of two French banks on Wednesday because of their exposure to Greece's debt, highlighting growing risks to Europe's financial sector from the deepening euro zone sovereign debt crisis.

The one-notch downgrade of Societe Generale and Credit Agricole came hours before the leaders of Greece, France and Germany were due to hold a video conference on measures to head off a possible Greek default, which has prompted rising global alarm over the potential fallout.

China added its voice to US concerns over Europe’s apparent inability to stop the debt mess from growing, while Indian and Brazilian officials said major emerging economies were discussing increasing their euro debt holdings.

Moody’s kept BNP Paribas on review for a ratings downgrade saying the bank’s profitability and capital base provided an adequate cushion to support its Greek, Portuguese and Irish exposure.

With senior European and International Monetary Fund (IMF) inspectors due in Athens on Monday to check Greece’s faltering compliance with its bailout programme, Chancellor Angela Merkel and President Nicolas Sarkozy were expected to press Prime Minister George Papandreou to enforce unpopular austerity plans to meet fiscal targets.

Sarkozy told his cabinet France would do everything in its power to save Greece.

Chinese Premier Wen Jiabao said Beijing was willing to help its biggest trading partner, but added that Europe must stop the crisis — which now threatens Italy — from growing.

“What we have to take note of now is to prevent the sovereign debt crises from spreading and expanding further,” Wen said on Wednesday in an apparent response to pleas to buy more euro zone government bonds.

A senior Indian offficial said finance ministers of Brazil, Russia, India, China and South Africa would discuss a Brazilian proposal to increase their holdings of euro zone bonds when they meet in Washington on Sept 22.